• The Reserve Bank of India (RBI) regulates and supervises Public Sector And Private Sector Banks
  • In addition, whole-time Directors of nationalized banks and State Bank of India are appointed in consultation with RBI.
  • RBI has powers under other laws as well, which include, inter alia, the power under section 12 of the Foreign Exchange Management Act, 1999 to inspect for compliance with the Act and rules etc. made thereunder.
  • RBI also maintains the Central Repository of Information on Large Credits (CRILC) on aggregate fund-based and non-fund-based exposures of Rs. 5 crore and above of all banks.
  • Further, RBI maintains the Central Fraud Registry and banks report all frauds involving amount above Rs. 1 lakh to RBI.
  • In addition, RBI’s Master Directions on Frauds lays out guidelines on categorisation, reporting and review of frauds, along with norms for consequent provisioning.
  • The powers of RBI are wide-ranging and comprehensive to deal with various situations that may emerge in all banks, including public sector banks.
  • No proposal with regard to change in RBI’s powers in respect of public sector banks is presently under consideration/consultation.
  • Improvement in regulatory functioning being an ongoing process, Government engages with stakeholders, including RBI, and discusses issues as they evolve.

Under the provisions of the Banking Regulation Act, 1949, it can, inter alia―

  • inspect the bank and its books and accounts
  • examine on oath any director or other officer of the bank
  • cause a scrutiny to be made of the affairs of the bank
  • give directions to secure the proper management of the bank
  • call for any information of account details
  • determine the policy in relation to advances by the bank
  • direct special audit of the bank
  • direct the bank to initiate insolvency resolution process in respect of a default, under the provisions of Insolvency and Bankruptcy Code, 2016